GEORGE GOMBOSSY: A shocking mistake

Published 12:00 am, Monday, October 11, 2010

When you make an error that costs the bank money, you have to pay a penalty. But when a bank makes a huge error, good luck trying to get something more than an apology.

Shock Baitch of West Hartford is still waiting for Bank of America to make amends for an error the bank admits having made, an error that damaged his wife's credit rating without cause. As a result, lenders cut their credit limits by more than $150,000 and hiked rates on their credit cards, costing them an additional $800 a month.

Baitch's story began about a year ago when he and his wife wanted to refinance their home in order to pay for improvements and to consolidate their debts.

They spoke to a BofA loan specialist and asked for the cheapest refinance option. The loan specialist tentatively put them into the "Making Home Affordable program," which unbeknownst to the couple would signal to the credit world that they were in financial straits.

When the couple received a package of papers to sign, they decided to go with a conventional mortgage because they did not want to have to add escrow costs and home insurance to their mortgage payments, not because they were aware of the ramifications on the loan program.

But it was too late. Shortly after that, in April, Baitch's wife (whose name is on the mortgage) received a letter from BofA telling her that the credit limit on one of her credit cards was reduced to $18,800 from $30,000. The two weren't worried because they had plenty of credit available on other credit cards. Baitch said he just figured that the bank was tightening everyone's credit.

It was only after his wife started receiving notifications from other creditors that several of her other accounts were being closed that the couple discovered what had happened.

Their bank, Bank of America, had reported to credit bureaus that they were in a loan modification program. That was a red flag to many creditors, which either cut their lines of credit or placed their debts in the highest interest rate category - the Universal Default rate.

Baitch met several times with Bank of America managers who promised to correct the erroneous credit report, but were told it was too late to refinance her mortgage because their credit scores had been damaged.

"I begged them that they can't do that in this case since they destroyed our credit scores," Baitch told me. "Although they admitted to making the mistake, I was told they cannot change the underwriting rules. So, in a nutshell, the other creditors will not reinstate the old credit limits because they use the current credit reports, BofA will not help because they use the current credit reports, and my monthly minimum payments have more than doubled because of the Universal Default rate."

"Bank of America lied and submitted fraudulent information to the credit bureaus and now I am literally and financially paying for it," Baitch said. "I looked into help with a consumer counseling service, but we can't participate because our income is too low to meet the payment requirement. I looked into bankruptcy, but we have too much equity in the house. I cannot meet the minimum payments now on the credit cards and may have to default. I am in a situation that I should have never been in since [the bank] destroyed our credit and ability to refinance. All our debt should have been consolidated and I should have positive cash flow monthly not negative."

Bank of American spokesman T.J. Crawford confirmed Baitch's story.

Once the call was made about the Home Affordable modification, "her account was coded as being in current status on payments but in a trial modification making partial payments," he wrote.

Creditors may or may not consider this coding as a demerit on the customer's credit history, Crawford wrote to me, adding that once the couple decided not to enter the program the coding should have been returned to its original state.

"Bank of America apologizes for any inconvenience this has caused," Crawford said, adding that the bank is working on restoring the credit limits on her Bank of America accounts and that the couple can later ask to have their credit limits reviewed by other credit card companies.

But as far as compensation goes for Bank of America's errors? Forget about it.

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